Capital gains tax

Tax on that profit, lower if held over a year.

In the US, capital gains tax applies when you sell an investment at a profit in a taxable account.

Short-term vs long-term

Gains on investments held one year or less are taxed as ordinary income. Gains on investments held longer than a year get lower long-term rates, which can be 0%, 15% or 20% depending on income.

Retirement accounts such as IRAs and 401(k)s follow their own rules, and no capital gains tax applies to trades inside them. Rules change, so check current figures or a tax professional for your situation.

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